Domestic Capital's Share Rises in India's Private Credit Market: EY Report
Source: Economictimes
Arth Insight · What this means for your wallet
- **Boosts your investments:** A stronger, domestically funded economy means potentially better long-term returns on your Indian equity mutual funds and stocks.
- **More stable job market:** Companies securing reliable local funding can grow better, leading to more secure jobs and potentially better salaries.
- **Resilience for your savings:** Less reliance on foreign capital makes the Indian economy more stable, protecting your long-term savings from global financial shocks.
India's private credit market is seeing a notable shift, with domestic funds playing an increasingly significant role, according to a new EY report. Overall investments were similar to $3.4 billion (approximately ₹28,220 crore) recorded in the second half of 2025, primarily driven by corporate refinancing and acquisition financing.
- ▸Indian funds are now playing a significantly larger role in providing private credit to companies, reducing reliance on foreign capital.
- ▸Total private credit investments in India reached approximately ₹28,220 crore, broadly matching the levels seen in late 2025.
- ▸This market growth is driven by companies seeking funds for refinancing existing debt, holding company needs, and business acquisitions.
- ▸The trend strengthens India's financial ecosystem and provides more diverse funding options for domestic businesses.
- ✓Indian funds are now playing a significantly larger role in providing private credit to companies, reducing reliance on foreign capital.
- ✓Total private credit investments in India reached approximately ₹28,220 crore, broadly matching the levels seen in late 2025.
- ✓This market growth is driven by companies seeking funds for refinancing existing debt, holding company needs, and business acquisitions.
- ✓The trend strengthens India's financial ecosystem and provides more diverse funding options for domestic businesses.
India's private credit market is undergoing a significant transformation, marked by a growing share of domestic capital, according to a recent report by EY India. The overall private credit investments in the country were comparable to the levels observed in the second half of 2025, reaching approximately $3.4 billion, which translates to about ₹28,220 crore at an exchange rate of ₹83 per US dollar.
Vishal Bansal, Partner for Debt and Special Situations at EY India, highlighted this shift, stating, "The growing share of domestic capital is one of the most significant developments in India's private credit market." This indicates a maturing financial ecosystem where Indian investors and institutions are increasingly contributing to the country's credit landscape.
What is Private Credit?
Private credit refers to loans provided by non-bank lenders directly to companies, often bypassing traditional banking channels. These loans can be tailored to the specific needs of businesses and typically involve institutional investors or specialized funds. It serves as an alternative source of financing, especially for medium-sized businesses or those with unique funding requirements that traditional banks might not cater to.
Key Drivers of Market Activity
The report identified several key drivers behind the robust activity in the private credit market. These include:
- Refinancing: Companies opting to restructure or replace existing debt with new private credit facilities.
- Holding-company funding: Financing provided to parent companies for various corporate purposes.
- Acquisition financing: Funds raised to facilitate mergers and acquisitions, supporting corporate expansion and consolidation.
These drivers suggest that Indian businesses are actively seeking flexible and timely funding solutions, and the private credit market is effectively meeting this demand.
Significance of Domestic Capital
The increasing involvement of domestic Indian capital in the private credit market is a crucial development. Historically, much of the private credit in emerging markets like India has come from international funds. A larger share from local funds signifies several positives:
- Reduced Reliance on Foreign Capital: It makes the Indian market less susceptible to global capital flows and foreign exchange rate fluctuations.
- Stronger Local Financial Ecosystem: It builds deeper capabilities within India's financial sector to assess, manage, and provide complex credit solutions.
- Alignment with Local Needs: Domestic lenders might have a better understanding of the local market dynamics, regulatory environment, and specific needs of Indian businesses.
Impact on Indian Businesses and Economy
For Indian businesses, especially those that may not fit conventional bank lending criteria, the rise of domestic private credit offers expanded access to capital. This can fuel growth, innovation, and job creation. For the broader economy, a diversified and robust credit market, supported by local capital, enhances financial stability and resilience. It ensures that critical funding is available to sustain economic activity and development, even during periods of global uncertainty.
The trend highlighted by the EY report underscores India's evolving financial landscape, where alternative financing channels are gaining prominence, backed by a growing pool of local investors.
This report is for informational purposes only and should not be considered financial or investment advice.
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Frequently Asked Questions
What exactly is 'private credit'?
Private credit involves direct loans made by non-bank lenders, such as specialized funds or institutional investors, to businesses. Unlike traditional bank loans or publicly traded bonds, these are private arrangements, often tailored to a company's unique funding needs.
Why is the rise of domestic capital in this market important for India?
A growing share of domestic capital in private credit reduces India's reliance on foreign funds, making the market more stable and less vulnerable to global economic shifts. It also signifies the increasing strength and sophistication of India's own financial institutions and investors in supporting local businesses.
How does this trend benefit Indian businesses?
For Indian businesses, especially those that might not meet traditional bank lending criteria, the growth of private credit with domestic backing offers an expanded and more flexible source of funding. This can help them finance growth, acquisitions, or refinance existing debt, contributing to overall economic development.
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